Chapter 7 Miami Bankruptcy Archives - Page 3 of 8

U.S. Supreme Court Issues Ruling Setting Sanctions for Bankruptcy Debt Collections

Posted on June 20, 2019by Admin

The U.S. Supreme Court issued a ruling this week that would hold creditors in contempt and face serious civil penalties if they attempt to collect on a debt that was canceled in a bankruptcy case. The ruling came out Monday, following an appeal from the U.S. Ninth Circuit Court. The Justices unanimously ruled that a court may hold a creditor in civil contempt if it is found that the creditor’s collection of the old, discharged debt is “objectively unreasonable.”

The fact that this ruling came as a unanimous decision is a win for consumers and provides a set standard for cases in the future. This case was an appeal from a circuit court ruling that found that creditors should be given some amount of leniency, even when it is unreasonable for them to believe that the bankruptcy discharge order is not applicable to the debt they are trying to collect.

The legal standard adopted by the Supreme Court was originally advocated by the U.S. Department of Justice. Justice Stephen Breyer penned the unanimous decision where he wrote that “a court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct.”

Since the Supreme Court sets the standard all lower courts must follow, this rule now provides a test judges can use when facing cases involving debt collectors who are continuing to collect on a debt after it has been discharged in bankruptcy. Therefore, all courts will need to review future claims under the question of whether there exists a “fair ground of doubt’ as to whether the creditor’s conduct might be considered lawful under the bankruptcy discharge order.

Up until this time, courts, including the Ninth Circuit, followed the good-faith standard, which allowed for these types of collections if the creditor was said to be collecting on the debt in “good faith.” The standard was extremely subjective and creditor friendly.

Justice Breyer clearly stated that this standard is meant to be an objective one and not a subjective standard. Courts are to review the facts of the case as to whether the violation was done on an objectively unreasonable understanding of the bankruptcy court’s discharge order.

Please click here to read more.

If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Related Resources:

https://www.courthousenews.com/supremes-set-sanctions-rule-for-bankruptcy-collections/

Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

What to Do if Your Medical Bill Gets Sent to Collections

Posted on June 18, 2019by Admin

Medical debt is an issue that plagues many Americans. It only takes one major medical crisis to set a person back hundreds, even thousands of dollars. According to the Kaiser Family Foundation, one in every three Americans report having difficulty paying their medical bills. As a result, a number of these individuals end up having their medical bills go into collections.

If you are one of the millions of Americans struggling with medical debt, remember you are not alone, and you do have options.

Negotiating a Settlement with Service Provider or Debt Collector.

If the debt has not been officially sent to a third-party debt collector but is being collected by the original service provider, the consumer can often work directly with that company to negotiate either a payment plan or settlement of the debt owed. The same could be said for if the debt has been sent to a third-party debt collector, although the entity contacted to negotiate on the debt will be different. This settlement can be done through three different possible methods including:

Reduced lump sum payment;
Percentage of debt payment;
Payment plans.

A lump sum payment is a common method used so long as the person has enough money to pay a large amount. The debt collector often would rather have some level of payment rather than nothing at all, so they will often take a lump sum payment to close the account, although the amount owed may be slightly less than what is paid. Many times, this method is preferred because the creditor or debt collector would rather receive a large lump sum of money immediately instead of keeping the negative account on the books or having the consumer file for bankruptcy where the debt would be discharged.

While very similar to a lump sum payment, some creditors will accept a specific percentage to pay off the debt, such as 25 to 30 percent, while forgiving the remainder owed. However, this type of settlement depends heavily on the balance. If someone owes a small balance, the percentage the creditor will accept may be much higher than the percentage of a large balance. Additionally, if the person is suffering from a financial hardship, the creditor may be more willing to work with that person on a percentage payment. Also, if there is a strong threat of bankruptcy, the creditor may accept a lower payment rather than get nothing through a bankruptcy discharge.

Many medical providers will work with the account holder on payment plans if they are not able to pay the bill off in full right away. However, these agreements need to be worked out timely and not after missing several payments, causing the account to go into default. Both parties must agree on an amount and the terms of the payment plan.

Get any Agreement in Writing.

Whatever settlement is worked out between the creditor/collector and consumer, it is important that this agreement be documented in writing. Without a firm commitment on the amount agreed upon, the consumer will have nothing to hold the collector to in the event they dispute the arrangement. It also gives the consumer something legally enforceable in the event the agreement falls through.

Payments Made but Still Sent to Collections.

The unfortunate fact is even if the consumer is making payments on the debt, the unpaid balance can still be sent to collections. Ultimately, it is a business decision that is made by the medical provider (i.e. – doctor’s office, hospital or dentist). How they handle the account depends on many factors, including how large the balance is, how much is being paid monthly, and how long it will take to finally pay off the amount owed. For example, if the individual owes $15,000 and is only making $10 per month payments, the provider may ultimately find that this is not going to work and could send the claim to collections, even though the $10 monthly payments are being made. This action can be much harder to accomplish if the parties have a written payment agreement, which is why it is extremely important that the payment arrangement be in writing.

Refusal of a Payment Plan.

It is always possible that a medical provider will refuse a payment plan. They are not legally obligated to work with the customer on a payment arrangement. For the most part, medical providers will work out payment arrangements out of goodwill, but if the person asking for the payment plan has failed several times before, they are not legally obligated to work out an agreement. The same goes for a collection agency. However, collectors do often work on commission, and because of this, they will often accept a payment plan that will pay off the obligation quickly, closing the account, and getting them paid.

How Medical Debt is Handled in Bankruptcy.

In bankruptcy, medical debt is treated the same as credit card debt. Medical bills are listed as general unsecured debt and can be easily wiped out in a Chapter 7 bankruptcy filing. Making the decision to file for bankruptcy is never an easy one. It can be difficult to get past some of the myths associated with filing for bankruptcy. Sometimes by waiting, an individual facing a lot of debt can find himself or herself in an even worse situation. Filing for bankruptcy can help protect valuable assets, including your home, car, IRA and social security. It will put an end to wage garnishment and any lawsuit being filed to collect on the debt, thanks to the protections of the automatic stay.

Those who have experienced illness or injury and found themselves overwhelmed with medical debt should contact an experienced Miami bankruptcy attorney. In bankruptcy, medical bills are considered general unsecured debts just like credit cards. This means that medical bills do not receive priority treatment and can easily be discharged in bankruptcy. Bankruptcy laws were created to help people resolve overwhelming debt and gain a fresh financial start. Bankruptcy attorney Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Related Resources:

https://www.inquirer.com/health/consumer/challenge-medical-bill-debt-collection-tips-20190610.html

https://www.growingfamilybenefits.com/negotiate-medical-bills-settle/

Bankruptcy Law

Miami Bankruptcy Attorney Timothy S. Kingcade Named a Florida Super Lawyer 6 Consecutive Years

Posted on June 11, 2019by Admin

Managing Shareholder, Timothy S. Kingcade of the Miami-based bankruptcy and foreclosure defense law firm of Kingcade Garcia McMaken has been selected for inclusion in Florida Super Lawyers 2019, in the practice area of consumer bankruptcy. This is the sixth consecutive year Kingcade has been selected to the Florida Super Lawyers list (2014-2019). The prestigious honor is awarded to only five percent of lawyers in the state.

Attorney Kingcade practices exclusively in the field of bankruptcy law, handling Chapter 7 and Chapter 13 filings for the Southern District of Florida. As an experienced CPA and proven bankruptcy attorney, Timothy Kingcade knows how to help clients take full advantage of their rights under the bankruptcy laws to restart, rebuild and recover.

Super Lawyers is a listing of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement, representing the top 5 percent of Florida lawyers. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates and peer reviews by practice area. The result is a credible, comprehensive and diverse listing of exceptional attorneys.

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Miami-based Kingcade Garcia McMaken, P.A. was established by managing partner and bankruptcy attorney, Timothy S. Kingcade in 1996. The firm represents clients throughout the State of Florida in Chapter 7 bankruptcy and foreclosure defense cases. The firm is committed to providing personalized service to each and every client, clearly explaining the options according to the unique circumstances of his or her life. The office environment and the service provided are centered on a culture of superior client care for the financially disenfranchised. All partners and associates at Kingcade Garcia McMaken, P.A. specialize in consumer bankruptcy and foreclosure and have dedicated their practices to this area of the law. Additionally, all attorneys and staff members at the firm are bilingual speaking Spanish.

Bankruptcy Law

Kristina Gonzalez of Kingcade Garcia McMaken Named a 2019 “Rising Star” by Florida Super Lawyers

Posted on June 11, 2019by Admin

Attorney Kristina Gonzalez of the Miami-based bankruptcy and foreclosure defense law firm of Kingcade Garcia McMaken has been selected for inclusion in Florida Super Lawyers 2019 as a Rising Star in the practice area of consumer bankruptcy.

The list recognizes the top up-and-coming attorneys in the State of Florida, who are 40 years of age or younger, or those who have been practicing law for 10 years or less. A select group of 2.5 percent of attorneys are named to the prestigious Rising Stars list.

Gonzalez has been licensed to practice law in the State of Florida since 2011. She is a graduate of the University of Florida Levin College of Law and practices exclusively in the field of consumer bankruptcy law, handling Chapter 7 and Chapter 13 filings for the Southern District of Florida.

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student loan debt

Why Student Loan Debt is Worse for Women

Posted on June 7, 2019by Admin

An estimated $1.46 trillion is owed nationwide in student loan debt, affecting nearly 44 million borrowers. However, nearly two-thirds of those borrowers are women, owing a collective $929 billion of the total student loan debt, according to a recent report issued by the American Association of University Women (AAUW). Of these female borrowers, a large percentage of them are women of color.

The AAUW report also showed that the amount of student loan debt women graduate with is more than the average debt carried by their male counterparts. A woman graduating with a bachelor’s degree leaves with $21,619 in undergraduate student loans while a male student leaves with $18,880 in student loans. The AAUW report also showed that it takes women two years longer than men to pay off their student loans. Black and Hispanic women were reported as taking longer to pay off their student debt.

One of the reasons given for the disparity in time it takes women to pay off student loans has to do with the gender pay gap, as well as childcare issues. A female borrower may have to take time off work after having children or work only part-time, which would make it understandable if she took longer to pay off student loans than a male borrower. These issues of pay and childcare also seem to affect minority women more than others, which could also be a leading cause for why this group of borrowers takes even longer to pay off their loans.

According to figures from PayScale.com, women make 79 cents for every dollar a man makes. Even if a female borrower does not take time off to have children, she is at a disadvantage to her male counterparts when it comes to paying off loans. The lack of affordable, quality childcare also presents an issue, especially for minority women, which also contributes to the disparity in how long times these borrowers to pay off their loans.

To help offset these issues, many grants and scholarship programs are available for female undergraduate students. However, these programs only go so far and will only help those students who are either aware of these programs or have the resources to apply for them.

Please click here to read more.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. There are ways to file for bankruptcy with student loan debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Credit Card Debt

More Than One-Third of College Students Already Have Credit Card Debt

Posted on June 6, 2019by Admin

A significant number of college students report that they have accumulated credit card debt while attending school. According to a recent report from AIG and EVERFI, 36 percent of all college students have a credit card with a balance of over $1,000 on it. This is on top of the student loan debt they are carrying.

Many of these students are using credit cards to pay for groceries, books, or entertainment expenses. Of students surveyed, some say they choose to use their credit cards over debit cards for the benefits the cards include, such as travel miles. These students are following a nationwide trend when it comes to using credit cards to pay for everyday expenses. A recent survey showed that 23 percent of Americans use their credit cards for necessities, including rent, food, and utilities.

However, problems arise when these cardholders are not able to pay down the balance every month. The situations can get even worse if the cardholder falls behind on payments, pushing the accounts into delinquency. The Federal Reserve Bank of New York reported that more than eight percent of balances held by young cardholders between the age of 18 to 29 were seriously delinquent. Being seriously delinquent means that the accounts are at least 90 days overdue with no payment made.

The EVERFI and AIG survey found that 15 percent of college students took a hit on their credit scores because of being behind on their credit card payments. Missing a credit card payment will not only cause the card’s interest rate to skyrocket, but it will also seriously affect that person’s credit score. The higher the interest rate is, the harder it is for the person to pay off the card over time.

It can be a definite struggle for the student to handle both a credit card and student loan payment after graduation. Students should put together a plan to pay off the credit card debt as quickly as possible by setting a deadline and a goal on how quickly the person can handle paying off the card. The plan only works if the student does not continue spending on the card and makes more than the minimum monthly payment on the card.

As bankruptcy attorneys, we see credit card debt as one of the most common problems facing those with serious financial challenges. It is not surprising with the high interest rates, unreasonable fees, and never-ending minimum payments that do not even make a dent in your actual debt. We offer additional tips for eliminating credit card debt on our blog.

Please click here to read more.

Bankruptcy Law, Debt Relief

How to Bounce Back After Bankruptcy

Posted on June 4, 2019by Admin

There are many misconceptions surrounding the amount of time it takes to rebuild credit and bounce back after bankruptcy. A recent study by LendingTree, reveals that individuals who file for bankruptcy can improve their credit score sooner than they think. In fact, more than 40 percent of consumers end up having a credit score of 640 one year after filing for bankruptcy. Approximately 65 percent of filers see the same score, at least, three years after the bankruptcy case is over.

We have some important tips to help you bounce back and stay on track after filing for bankruptcy.

Put Together a Bankruptcy File.

After the bankruptcy case is complete, chances are, the filer has a lot of paperwork. It can be very tempting to put it all away, never to look at it again, but it is important to keep all these documents handy in the event they are needed in the future. If a consumer wants to purchase a car or a home, he or she may need to produce the bankruptcy paperwork before receiving financing. It helps to stay organized and put together a file for your bankruptcy paperwork.

Look Back at the Past and Strategize for the Future.

Before moving forward, it helps if the consumer gets a clear understanding of how he or she got in the bad financial situation to begin with, whether it be due to a job loss, divorce, an illness, overspending, or just bad financial luck. It helps to take a moment and strategize how the consumer wants to move forward.

Develop a Good Relationship with a Bank.

Even if the possibility is in the distant future, if the consumer wants to qualify for a loan or make a big purchase, like a home, it is important he or she has a personal relationship with a good bank. Many times, it helps to tell them a bit about how the person ended up in bankruptcy and give them a human face to the numbers on the account.

Be Cautious in the Future.

Once a consumer is out of debt, he or she will likely receive communications from lenders offering financing for various purchases. They will see that the person no longer is in debt and will not be able to declare bankruptcy again for many years, making that person an easy target. The kind of lenders who reach out to consumers right after bankruptcy, however, are not always the most reputable lenders. Be very cautious when considering these offers.

Review Your Credit Report.

After filing for bankruptcy, it is important to periodically review your credit report. A credit report can be reviewed annually for free, and it shows not only the progress being made in rebuilding the consumer’s credit score but also any false or old charges that should no longer be on the report.

Think Before Borrowing.

It can be tempting to borrow again, believing that the consumer can handle a payment when, in fact, he or she cannot. Make sure that the payments are feasible by building a budget before applying for another loan. Also keep in mind that a credit score takes a hit after applying for a new loan, and this could quickly destroy any progress made on rebuilding the credit score.

Work on Rebuilding Your Credit.

One of the best ways to get credit back to where it once was is to pay all bills on time every month. Missing a payment is an easy way to hurt your credit score. Using a secured credit card after filing for bankruptcy is also an excellent way to improve your credit score, as the payment history is reported to the credit bureaus. Put together a budget, see what your monthly expenses are, and stick to that budget. Make sure you have enough income every month to meet your monthly obligations, and set up automatic payments, if needed, to make sure no bills are missed.

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Bankruptcy Law, Credit, Debt Relief, Timothy Kingcade Posts

How to Improve Your Credit After Bankruptcy

Posted on May 28, 2019by Admin

The decision to file for bankruptcy is a tough one to make, but it is often the first step in gaining control of your financial future. A common concern people have when filing for bankruptcy is the effect it will leave on their credit score and their ability to access credit, again. While bankruptcy does affect your credit score, it is sometimes the last resort to rebuild your credit and your life.

In fact, it is oftentimes easier to reestablish your credit after filing for bankruptcy, because you are essentially given a “fresh start.” Here are some quick tips to help rebuild your credit after filing for bankruptcy.

Pay Your Bills on Time. Take full advantage of your financial fresh start. Make consistent and timely payments on all of your bills and any remaining debts moving forward, like your mortgage and car payment. These consistent payments over time will help improve your credit score and re-establish your credit.
Monitor your Credit Report. Make sure and check your reports every few months for errors. Confirm that any negative marks (i.e. – your discharged debts) have been removed.
Use a Secured Credit Card. With a secured credit card, you deposit with the lender an amount equal or nearly equal to the maximum credit line on the card. Unlike with a debit card, your payment history for a secured card is reported to the credit reporting agencies.
Budget. Create a realistic budget for yourself. Review your finances several times per week to ensure you are sticking to your budget.
Set up Auto-pay. Set up automatic payments for your cable, Internet and phone bills, so you do not miss your payment due date. Again, watch your finances closely so that you know when money will be coming out of your account.

There are proven ways to rebuild your credit score after bankruptcy, and our clients are proof!

My credit score said on all three reports 775, I couldn’t believe that I had such a great score before 10 years. Tim for me was the best move I have made for my situation. I have no regrets; I am glad the past is the past. – Bill T.

Hi Tim- I just wanted to send a quick note and thank you and your team for handling my bankruptcy case. It is only a month or two after discharge, and my credit scores are already in the upper 600’s. – C.S.

Source:

https://www.thebalance.com/how-to-improve-your-credit-score-after-bankruptcy-316108

Bankruptcy Law, Debt Relief, Timothy Kingcade Posts

Top 10 Tips for Negotiating with Creditors

Posted on May 21, 2019by Admin

At Kingcade Garcia McMaken, our No. 1 piece of advice to those struggling with debt is to be honest with creditors. If you are unable to make a payment, do not make a promise to pay and never provide a creditor with your debit card or bank account information.

In our latest blog, we have some tips for negotiating with creditors.

Keep Your Story Straight and Stick to the Facts

One important fact to keep in mind is that the person on the other end of the phone line is not your friend. Many individuals will try to get them to understand the personal details of how they got into their situation. It is important to tell the creditor or debt collector that you are going through a financial hardship and are working to get back on track. Keep to the facts and be honest with creditors. If you are unable to pay, tell them that.

Take Notes of Your Conversation

Whenever you speak with a creditor or debt collector, take notes of what is discussed. Be sure to write down the name of the person on the other end of the line, the time of day and date when the discussion occurred, write down what was discussed, and any statements made from the collector. This information may be needed later if the creditor or debt collector disputes the conversation.

Ask Questions

Never take what a debt collector or creditor says as the gospel truth, believing everything that is said. Many times, creditors or collectors will say just about anything to get someone scared enough to pay on the debt. Under the Fair Debt Collection Practices Act (FDCPA), you have rights as a consumer.

Do Not Argue

While asking questions can be a good thing, it is important to remain calm when talking to the creditor or collector. Losing your temper is never productive. Collectors are skilled at pushing a person’s buttons to get them to react, but it is important that you not let them push you too far. If you get to the point where you feel like you will lose your cool, the best thing to do is tell the collector you will be ending the call, hang up and return to the conversation later.

Save All Written Communications

It is likely that creditors or debt collectors will communicate via U.S. mail, in addition to telephone communication. It is imperative that all correspondence be opened and not ignored. Keep track of any mail received from the creditors and save it in a file for later use.

Be Aware of Your Budget

Before making any plan with a creditor or collector, make sure that a budget is prepared, outlining just how much money could go towards paying that specific debt. The last thing a person wants to do is agree to a payment plan or a set amount only to find out later that the amount that was agreed-upon is not actually realistic. Do this before opening any lines of negotiation with creditors.

Try to Negotiate Directly with the Creditors

If it is at all possible, try to work out a payment agreement with the creditor first before the matter is turned over to collections. After that point, you will be forced to deal directly with the debt collector and not the original creditor. Once the account is sent to collections, your credit score will take a significant hit, and that drop in your credit score can be even worse the longer the account stays in collections.

Get Any Agreement in Writing

When negotiating on the debt, whenever an agreement is reached, it is important that the agreement be memorialized in writing. This rule applies to a payment plan or an agreed debt settlement. Before any money changes hands, get the agreement in writing first. Otherwise, if the collector changes the terms of what was originally discussed, it ends up being a matter of your word against theirs.

Seek Assistance If Necessary

Negotiating with collectors or creditors is not easy by any means. Many times, it helps to call in the professionals to do the negotiations for you. Credit counseling agencies can help you work out an agreement with your creditors or with collectors, but it is important that you do your research first before choosing a credit counselor. Additionally, if a collector is being particularly persistent, it can help to seek the assistance of a bankruptcy attorney in fielding these calls and working out agreements on the amount owed.

Determine if the Debt Should Be Paid

If the person is struggling to pay on multiple unsecured debts, including credit cards, personal loans and medical debt, bankruptcy may be the best option for that person in the end. It never pays to leave the debt unpaid for too long. Once the debt goes into collection and even further into a judgment, that person’s wages can be garnished to pay the debt. Having a debt go into collections can adversely affect a person’s credit score. If the end result will be that the person files for bankruptcy, it may be advisable to talk with a bankruptcy attorney before entering into any payment plan and discussing which option would be best in the long run for that person.

Source:

https://www.credit.com/debt/ten-tips-for-negotiating-with-creditors/

Bankruptcy Law, Timothy Kingcade Posts

How Will Filing for Bankruptcy Affect My Children?

Posted on May 20, 2019by Admin

It is a common concern of parents filing for bankruptcy. In this blog, we will address common bankruptcy concerns involving children, including: What happens to children’s bank accounts and 529 educational savings accounts in bankruptcy? Will I be able to take out student loans for my child after filing for bankruptcy? Will my child lose property? What happens to child support obligations in bankruptcy?

Your Child’s Property

Technically, any property in your home is yours and not your child’s. This includes your child’s furniture, toys and clothing, even though they may have been gifted directly to the child. If the child paid for a piece of property from his or her own money and this fact can be proven, the property is the child’s exclusively.

The good news is this property is an expemption, allowing it to be protected in the bankruptcy. If the filer is proceeding with a Chapter 13 bankruptcy case, the bankruptcy filer will get to keep all personal property. In a Chapter 7 bankruptcy case, the filer can keep up to $1,000 in personal property under Florida’s bankruptcy exemptions, which includes household furnishings and clothing. If the amount exceeds the $1,000 limit, the bankruptcy trustee will normally not look to sell this property to pay off debts unless the property is extremely valuable.

Bank Accounts

Many parents open up bank accounts and hold them in trust for their children. The good news is these accounts are protected in bankruptcy. Under the Uniform Gifts to Minors Act, money in a child’s bank account is not considered your money, meaning you, as the parent, are holding this money in trust for your child. Therefore, neither the bankruptcy trustee nor the creditors will be able to access this money. However, filers should be cautious when transferring large amount of money into the child’s account right before filing for bankruptcy.

529 College Accounts

Many parents also put money away into education savings accounts under section 529 of the Internal Revenue Code (IRC) to help give their children a head start in saving for college. This section of the IRC also offers tax advantages, as well as creditor protection, which is another reason why so many parents take advantage of it. The federal bankruptcy code specifically excludes 529 funds from being lumped as part of the bankruptcy estate. However, for this money to be protected, the beneficiary must be the filer’s child, stepchild, grandchild or step-grandchild. Also, the court will look at the timing of when deposits were made into the account. Deposits that are made within 365 days before filing for bankruptcy are not protected. If a deposit is made anywhere between 365 and 720 days before filing for bankruptcy, the filer can exempt up to $6,225 per beneficiary. Anything that was deposited more than 720 days before filing for bankruptcy is exempt and protected from bankruptcy creditors.

Financial Aid

Another piece of good news is the fact that filing for bankruptcy will not hurt your child’s ability to qualify for financial aid for college, including Pell Grants and Stafford Loans. The parent, however, will be disqualified from receiving any credit-based financial aid, including a Parental Loan for Undergraduate Students (PLUS) loan if the parent declared bankruptcy within the past five years. If that does happen, the filer’s child will qualify for an increased amount of unsubsidized Stafford loans.

Child Support Payments

One important fact to know about child support and bankruptcy is that child support obligations are non-dischargeable in a bankruptcy case. Therefore, if the filer owes a large amount in back child support, this debt is considered priority debt and is paid first from the liquidated assets in a bankruptcy case. Child support payments must also be paid during a Chapter 13 bankruptcy repayment plan. In fact, a bankruptcy court will not grant a discharge in a Chapter 13 case if the person is not current on his or her post-filing child support payments. Child support income is also protected in a bankruptcy case, if the filer is the parent receiving the child support, since that money is meant for the support and well-being of the child.

Related Resources:

https://www.thebankruptcysite.org/resources/bankruptcy/filing-bankruptcy/how-does-filing-personal-bankruptcy-affect-my-children

https://www.nolo.com/legal-encyclopedia/florida-bankruptcy-exemptions-property-assets-bankruptcy.html